Dividing credit card rewards in a divorce

When a married couple splits, dividing the credit card reward
miles and points can become tricky.

Sometimes couples forget about them. They can be hard to
value. Some programs won't let you divide them. And occasionally, one of the
divorcing spouses will burn through them all -- sometimes with a new love
interest -- as the marriage disintegrates.

With rewards programs so popular, divorce lawyers say divvying
up points and miles should be a routine part of any divorce. That appears to be
the case in Hollywood, at least. When Kris and Bruce Jenner divorced in 2014, the Los Angeles
Times reported that they negotiated a settlement that addressed "their
17-year-old daughter's private school tuition and their frequent flier
miles." Same with "Glee" star Jane Lynch, whose 2014 divorce
settlement called for her and her ex to "split various bank accounts
($847,485), a 401(k) ($315,079), a tax refund ($56,810) and even their airline
miles," according to Yahoo Celebrity.

Just because they can't get exchanged for cash doesn't mean they don't have value.

--
Stann W. Givens
Divorce lawyer

Although many separating couples divide reward points without
incident, sometimes figuring out exactly how can lead to arguments. It's
important to keep things in perspective. "People get really excited about
them and get emotional about them as if it's really an important asset,"
says Leon Finkel, managing partner at Berger Schatz in Chicago, one of the
country's largest matrimonial firms. "In a divorce situation, people fight
about things because they are angry and emotional, not because it makes sense."

In reality, Finkel says, there are usually much bigger items
to divide, such as a house. Compared to big-ticket items, points that might be
worth just a few thousand dollars can seem inconsequential. "I charge $480
an hour for office time, so how much time do you want me to spend arguing over
your points?" Finkel says.

That doesn't mean they're always worth ignoring, though. If
you or your spouse has accumulated a large stash of points, you'll want to
consider them in your settlement.

How points get
divided
When a divorcing spouse goes to a divorce lawyer, the lawyer
routinely requests all sorts of financial information from the couple, such as
bank statements and credit card bills. Increasingly, that list of
documents includes information about frequent flier programs.

Lawyers say that ordinarily, points and miles accumulated by
each spouse over the course of a marriage are considered marital property and
are split 50-50 during a divorce. Although states have different ways of
dividing assets in a divorce -- through legal concepts known as either
equitable distribution or community property -- there's usually a presumption
that assets will be split fairly and evenly, including miles and points.

One major exception would be if the points are exclusively accumulated
and spent by a business one of you owns. In that case, the points would not be
considered a marital asset. But if you usually use the business's points for
personal expenses, they probably would be considered a marital asset.

Dividing the points can be messier than, say, splitting up
cash from a bank account. Some reward programs do not allow points to be
transferred from one account to another, even in a divorce.

When the points and miles can't be neatly divided, some
common options include:

Agreeing that each spouse can use half the points. This
approach requires continued cooperation and contact after the divorce, so it
might not be best for acrimonious splits.

Stipulating that the points will be used for the couple's
children, such as getting a son or daughter back from college for the holidays.

Assigning a value to the points, then paying the other
spouse half that value.

Determining the value can be tricky, however, since points
can generally be used for all kinds of redemptions of different amounts. In
addition, the fine print of most reward program rules say that points have no
value. But lawyers say even though it might be difficult to determine the worth
of points and miles, they are not worthless.

DIVORCE POINT-ERS

Divorce lawyers offer these pieces of advice for people
about to divorce who are concerned with reward points and miles:

Be sure to mention
them. There are lots of assets to split in a divorce, and reward programs sometimes get overlooked. If your spouse has a lot of points or frequent flier miles, mention that to your lawyer.

Don't sweat the
small stuff. Don't get hung up on reward points and miles if there's not a lot to split.

Consider how to divide them. Assuming that your rewards and your spouse's are marital property, they will likely be divided 50-50. Transferring points so that they are divided equally is the easiest way, but not all programs allow this. Be prepared to assign a value to the rewards, or devise a structure in which each of you can use them.

Story continues below

DIVORCE POINT-ERS

Divorce lawyers offer these pieces of advice for people
about to divorce who are concerned with reward points and miles:

Be sure to mention
them. There are lots of assets to split in a divorce, and reward programs sometimes get overlooked. If your spouse has a lot of points or frequent flier miles, mention that to your lawyer.

Don't sweat the
small stuff. Don't get hung up on reward points and miles if there's not a lot to split.

Consider how to divide them. Assuming that your rewards and your spouse's are marital property, they will likely be divided 50-50. Transferring points so that they are divided equally is the easiest way, but not all programs allow this. Be prepared to assign a value to the rewards, or devise a structure in which each of you can use them.

"Just because they can't get exchanged for cash doesn't
mean they don't have value," says Stann W. Givens, a divorce lawyer in
Tampa, Florida. "Most of the time, we can work out an agreement between
the husband and wife as to what that is if, in fact, you can't work out
dividing the points."

One place to start when considering point values is with the
valuations published by bloggers such as The Points Guy, or those included in
the Wallaby rewards app. You can adjust those valuations based on your own
subjective criteria.

Tread carefully
pre-divorce
If you think your marriage is headed toward divorce and you
have a lot of reward points, there's no surefire way to protect them from your
soon-to-be ex-spouse, lawyers say.

Sure, you could spend them, so that when one of you files
for divorce, there are fewer points to divide. But lawyers caution that divorce
judges can take a dim view of a spouse who squanders marital assets for
personal advantage, under a legal doctrine knows as "dissipation."
The divorce settlement could factor in a wasteful use of miles or points.

"If you go find a girlfriend and climb into the back seat
of a car every Thursday, the judge doesn't care," Givens says. "But
if you go to Tahiti with that girlfriend and spend $10,000 of marital money, the
judge cares."

The same principle applies for using reward points, he says.

Many times, though, points and miles balances are simply too
small for divorcing couples to worry about. There's no consensus on when it
makes sense to include reward points in a divorce settlement, but if there's is
a substantial value -- say, they're worth at least a couple plane tickets -- it
could be worth pursuing.

"It doesn't make sense to squabble over point balances
that are in the couple thousands,"
says Lili Vasileff, a certified divorce financial analyst in Greenwich, Connecticut.
"It's important to recognize that there's a threshold that it doesn't make
any sense to go after if it's minuscule."

Although divorcing couples sometimes argue over how to
divide rewards, most figure it out without incident.

Sometimes, having those rewards can come in handy after a
divorce. Vasileff says one of her clients, stressed out from the disintegration
of her marriage, used points from her ex-husband for a spa getaway.

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